The fixed income market is starting to shows signs of strain with foreign exchange business Travelex confirming that it will miss a scheduled €14.4 million interest payment that was due t be paid to investors. The decision has been made by the company as it moves to support its finances, hit by the drop off in travel and international business transactions during the coronavirus lockdown.
Travelex is owned by parent company Finablr, which is listed on the London Stock Exchange and itself in serious trouble after recently announcing the uncovering of a $1 billion in hidden debt. That means its indebtedness is up to four times higher than the company had reported to markets. That led to the company putting itself up for sale last month.
Finablr, owned by the Indian-born businessman Bavaguthu Raghuram Shetty, acquired Travelex 5 years ago. The company was found by Sir Lloyd Dorfman as a single London foreign exchange bureau in 1976. The company is now the world’s biggest foreign exchange business with a network of ATMs and branches around the world. It has a major presence at international airports. Travelex also provides foreign currency exchange services for a number of major UK banks including Barclays, Royal Bank of Scotland and NatWest.
However, it’s had a bad run in recent times. Before the coronavirus pandemic largely shut down the international travel a lot of the company’s business depends from, it was reeling from a combination of the issues facing parent-company Finablr and a cybersecurity attack that took down its systems in January.
It is believed to have been carried out by the same group of hackers that this week leaked details of the legal files of celebrity clients of New York lawyers Grubman Shire Meiselas & Sacks. The legal company is being asked to pay a $21 million ransom or face the public release of the stolen files of celebrities including Lady Gaga and Elton John. Travelex was also blackmailed and the company has refused to comment on whether or not it paid a ransom.
Analysts have warned holders of junk rated investment bonds to expect a sharp increase in the rate of defaults over coming months. Investment grade bond holders may also not be completely immune, though the amount of liquidity provided by central banks during the pandemic crisis is believed to have prevented a much worse situation for fixed income investors.